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Here's my Top 10 links from around the Internet at 10 am in association with NZ Mint.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must watch today is #7 on US wealth inequality, which is going viral. It's all very ironic on a day when the Dow hit a record high and household income is at a one decade low.
1. Cash for access - Just when we all thought the culture of the City of London couldn't get any more corrupt and cynical, it does.
The FT has reported that investment banks are pimping out access to chief executives to fund managers at US$20,000 an hour, often without the CEOs knowing it.
The cynicism is laid bare.
Hedge fund managers and other big shot fund manager are buying the time of CEOs to get inside information on how companies are being run.
Investment banks are essentially using their relationships with companies to make a profit at the expense of regular investors and faith in a level playing field.
They are the pimps and the CEOs are the prostitutes.
The poor old Mum and Dad investors are the 'Johns' in this process.
Just extraordinary. It better not be happening here. Email me if you're in the investment banking or funds management scenes in New Zealand and you've seen this sort of thing happening.
Investment banks are charging asset managers up to $20,000 an hour to meet the chief executives of their corporate clients – often without the chief executives having any idea that their time is being sold. The revelation comes amid a push by regulators and the fund industry in the UK to lift the lid on payments for corporate access, although the practice is also commonplace in continental Europe, the US and, increasingly, Asia.
Figures from the annual Thomson Reuters Extel Survey show European asset managers paid 29 per cent of their dealing commissions for corporate access in 2012, up from 21 per cent in 2010, despite a 2006 ruling in the UK by the Financial Services Authority that commissions should only be paid for execution or research. A quarter of asset managers in both the US and the UK allocate more than half their commissions for corporate access, according to research by CA Cheuvreux, a French broker.
China is “fully prepared” for a currency war should one happen, central bank Deputy Governor Yi Gang said in Beijing yesterday, the official Xinhua News Agency reported.
“China is prepared,” Yi was quoted as saying by the agency, which gave no further details about where he spoke. “In terms of both monetary policies and other mechanism, China will take into full account the quantitative easing policies implemented by central banks of foreign countries.”
3. How the plutocrats get what they want - Chrystia Freeland at Reuters writes here about research showing people in the top 10% of incomes tend to get what they want when it comes to government policy.
The Demos study draws in part on the quantitative research of Martin Gilens, a professor of politics at Princeton University and author of “Affluence and Influence: Economic Inequality and Political Power in America.” Gilens, who focused on the divide between the top 10 percent and everyone else, found a high degree of what he calls political inequality.
“I looked at lots of survey data that indicated what people at different income levels wanted the government to do, and then I looked at what the government did,” Gilens explained.
“For people at the top 10 percent, you could predict what the government would do based on their preferences,” he said. “But when the preferences of people at lower income levels diverged from the affluent, that had no impact at all on the policies that were adopted. That was true not only for the poor but for the middle class as well.”
4. 'The age of austerity is ending' - So says Anatole Kaletsky in this Reuters piece.
He thinks the Italian revolt signals the end of the German-led austerity strategy for Europe.
Discussing the outcome of Friday’s “sequestration” of U.S. government spending is best left to the month ahead, when we see how the public reacts to government cutbacks. But in Italy, Britain and the rest of Europe, this week’s events should help convince politicians and voters that efforts to reduce government borrowing, whether through public spending cuts or through tax hikes, are both politically suicidal and economically counterproductive.
In Italy, and therefore the entire euro zone, this shift is now almost certain. After the clear majority voted for politicians explicitly campaigning against austerity and what they presented as German economic bullying, further budget cuts or labor reforms in Italy are now off the agenda, if only because they would be literally impossible to implement. If Angela Merkel demands further budget cuts, tax hikes or labor reforms as a condition for supporting Italy’s membership of the euro, a majority of voters have given an unequivocal clear answer: Basta, enough is enough. Most Italians would rather leave the euro than accept any further austerity – and if Italy left the euro, total breakup of the single currency would follow with an inevitability that might not apply if the country exiting were Greece, Portugal or even Spain.
5. Basics of banking: loans create a lot more than deposits - Here's John Carney from CNBC with a few home truths about banking. Well worth a read.
What we have here is a functioning bank, a demonstration of how the basic infrastructure of banking is not built on a foundation of a bunch of cash that is then lent out. It's built on the loans themselves, with capital and reserves raised to meet regulatory requirements.
6. Here come the technocrats - Ambrose Evans Pritchard reckons Italy's President is planning to foist another unelected bunch of technocrats on Italy to keep the German creditors happy.
Italy’s president Giorgio Napolitano is exploring the creation of a second technocrat government to break the political log-jam and calm markets after key parties failed to reach an accord, risking a serious popular backlash. The EU policy elites are increasingly alert to the danger of losing popular consent for the EU Project.
European Central Bank governor Benoit Coeure said Europe must pay more attention to the “social contract” if it is to avoid feeding “nationalist temptations”. Mr Coeure warned that record unemployment across much of Europe - reaching 59pc for Greek youth -- was eroding the job skills of a generation and doing lasting damage to future growth, While the tone is changing, there is no sign yet of a retreat from fiscal belt-tightening. “Given that average debt exceeds 90pc of GDP in the EU, I don’t think there’s any room for manoeuvre to leave the path of budgetary consolidation,” said EU economics chief Olli Rehn.
7. Viral wealth Inequality video - Well worth a watch. One day a few Americans might revolt at this. Maybe. HT Tracey Barnett.
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"What I'm against is seniors stealing from future seniors."
10. Totally a 'Funny or Die' video previewing a new movie: 'Dow Jones'. Topical given it hit a record high overnight.
"I'll see you on the flip side Jive Turkey. Your stock's about to plummet!"
15 Comments
#1 P'raps, BH, you could adopt a house style that highlighted the House of Cards stuff we're seeing. Two examples:
The US stock 'market' rose again.
Latest Chinese 'data' reveal that the Gloriously Rich Ones still rule.
And so on.
Oh, #1. If you don't know what a Mark is, you're the Mark.....
#4 should be read together with #6.
This war between Creditors and Debtors nation is just starting. If Creditor wins, austerity wins, if Debtors wins, the Euro implodes and another GFC v.2 starts. So far creditors seems to hold the upper hand still....(because they still hold political power in EU)
But over the medium term (perhaps 5 years) the creditors will lose as the economic recession turn into a deep depression in Europe and spreads through the World via currency depreciation......
we will be seeing high inflation soon (in the mid teens) within the next 3 to 5 years as every country scramble for growth via currency depreciation, inflation, debt writeoff.....etc but not before an implosion of Severe Monetary and Stock market crisis, as this is the only route the Creditors can be defeated.
#1 BH "Just when we all thought the culture of the City of London couldn't get any more corrupt and cynical, it does."
WTF is up with that country? The UK (and US) government is totally captured by their finance sector spivs. Any talk of reining them in or, heaven forbid, prosecutions is met with a barrage of bleating about thousands of job losses, tax losses and relocating to Singapore. It clearly hasn't dawned on anyone there that the biggest threat to the City of London is it's own endemic corruption. Why would anyone trust these criminals ever again?
How long can they keep relying on a deeply corrupt finance sector and money printing to keep the place from outright collapse. Guess they haven't got much else and can no longer feed themselves or provide their energy and raw material needs. Where to from here for the UK?
Well, they can't rely on manufacturing any more. It's only about, what, 10-12% of national output. Still, lots of niche defence and aerospace work to keep some people busy, so at least that's something (e.g. BAe, Rolls-Royce engines, Airbus components, weapons).
But in the quest to turn the City into a world financial centre, they seem to have got the balance of tangible and intangible output a bit wrong, and seem to have been prepared to overlook ethics in the pursuit of financial growth. Still, you could say the same about many other western countries.
Post-industrial malaise, anyone?
JetLiner
I think that using the term 'spivs" is not quite right somehow. They are not really East end barrow boys made good- maybe once upon a time and maybe just a few- what they are is UK Public School elites. It is the plummy accent that gets us every time.
On one level you have to laugh and applaud them for their ideas for making money for themselves. It really is not their fault , it would be like blaming hyenas for being hyenas and tearing little fluffy animals limb from limb. It is just what they do.
BH - a nice look at the Future of Taxation, starting of course in Spain.
The Pain in Spain falls Mainly on the Sane.
Or, as Ralph Willis put it (Income Tax Blues, 1951)
"Taxes on my 'lectric, taxes on my gas
I'll soon be paying taxes on my yas, yas, yas....."
regarding pt 2...
My understanding is that since the GFC China accounts for more than 50% of new Global money supply growth...
If anyone knows about "currency wars"... I would think it would be the Chinese..
So .... this Central Banker is kind of huffing and puffing ...as the horse has already bolted....
Maybe this guy should try and see that Chinas own excessive money supply growth might be a contributing factor in Chinas Real Estate bubble..
Matt Nolan...are u there..???
Pt 5 above.... basics of banking...
This is close to my own view of how banking works..
It is quite a different view to yours... where u say that banks are basically intermediaries... who match up borrowers with savers..
http://www.interest.co.nz/opinion/63109/matt-nolan-takes-issue-bernard-…
I'm keen to hear what u think of the above article... ( this for my own learning..... i'm not being critical of your views )
Cheers Roelof
Re 5
http://www.rbnz.govt.nz/finstab/banking/4368385.html
Coming to your local friendly NZ bank - anytime after June 30. Haircuts.
We’re beginning to see evidence of what I call Indie Capitalism. My use of the word “indie” is deliberate. “Indie” reflects an economy that is independent of the prevailing orthodoxies of economic theory and big business. It shares many of the distributive and social structures of the independent music scene, which shuns big promoters and labels. And as happens with many bands, so many of today’s successful creative endeavors began as local phenomena before branching out to new locations and networks.
http://www.wired.com/opinion/2013/03/how-to-put-the-indie-in-capitalism/
The Rise of Indie Capitalism
Here’s a shocking truth: Occupy Wall Street and the Tea Party actually agree on something. They both hate crony capitalism, and they both love Steve Jobs. If this sounds freaky, let me add another weird fact: Practically all my students at the New School in New York, where I teach a course on creativity and capitalism, want to start their own companies. The New School is renown for being a bastion of lefty thought, going back to the 1930s and ’40s. My students want to be entrepreneurs. They want to be Kickstarter, kickass entrepreneurs. These students want to belong to what I call Indie Capitalism.
http://www.businessweek.com/articles/2013-02-26/the-rise-of-indie-capitalism
Interesting comment on deflation by PK. What I found most intersting was the historic period of the 1930s, deflation then onsiderable inflation...otheriwse we do a japan and get sticky inflation...need a trigger or panic it seems....
http://krugman.blogs.nytimes.com/2013/03/05/why-dont-we-have-deflation/…
regrads
Unlike you Steven he can acknowedge when he is wrong.
Sticky inflation or actually stagflation has what I have been saying all along.. right for four years although the stats and lead indicators suggest this may be changing....
Economists regardless of their ability should have access or obtain a battery of micro-economic statistics and modelling. Most in NZ do not have more than ther media generated dribble or limited resources...or it is a PR sound bite in intent.
The power in economics is in the leading economic consultancies and this information is not available to the public...unless you pay. Asymetric information for your advantage.
No, I can ak when Im wrong but not in this. Funny thing but sticky inflation = no inflation or even dis-inflation in effect just like Ive been saying, you are just being pedantic on the wording in this case. If you have indeed being saying sticky, well OK, (I dont recall that I admit. Mostly my impression is you seem to have been saying its hidden by Govns) Similar ppl with your Austrian outlook seem to be saying for 4 years printing = hyper-inflation, oh god buy gold and run for the hills hasnt happened and looks to be many months if not many years off.
"Asymetric information for your advantage." oh right, so you have the info, so you are the fountain of all that is correct...but you wont or cant prove it to us because the data is "private"
"changing" well ok thats a given, the Q is up or down? I mean right now you are bound to be proven right because actually yes shock horror things have changed.
"Power in economics" actually Im not going to agree, we have lots of good historic data that is open to public view, and the policies enacted on that and what worked and what did not.
Leading data, quite a few bits of these data get hyped as "up" (or down) one month and interpolated up for months (oh look a recovery) only to be quietly corrected to actual data some weeks or months later.
Then there is political bias, of which you show a lot IMHO....yeah good luck, whatever.
So sure give your opinion...I have mine...as PK says (paraphrase) "those who followed the WSJ editorial over the last few years and not me would have lost a lot of money".
regards
No, I can ak when Im wrong but not in this. Funny thing but sticky inflation = no inflation
Steven..I've read ur posts from time to time...
As far as I can tell u were, and still are, expecting some hard core deflation.. with real estate dropping 30-50%...
Are u still strongly convinced we are headed for the deflationary abysssss.. ??
I agree with u when when allude to the corruption of satistical data... A good example is the way the CPI is calculated.
It might be a little remiss to determine the inflation/deflation arm wrestle by the CPI .
It is my view that 2 of the most powerful economic forces/influences are Central Banks and Governments/politictians.... ( and they are into money printing )
It would take a huge shock... to spark the deflationary spiral that u are looking for..
As far as I can see... NZ is going thru another credit growth cycle.. ( ie. another business cycle based on credit growth ).
When u look at the Political rhetoric coming out of China, Japan, Europea and USA... its' all about money printing and anti- austerity.
In the investment world they talk about riskon and riskoff... Up until recently big investors had a riskon view and had alot of cash in safety... Now they are moving to a more riskoff view...and that money is starting to flow into the mkts.... chasing returns...(.We could easily get into asset price bubbles again.)
3 yrs ago I held ur view about the risk of deflation... but not now. ( thou I'm brutally aware of how fragile and volatile the global economy is...... and of how the western worlds working and middles classes are less able to handle shocks)
Also.. I do like Austrian economics.. find alot of their stuff really relevant and useful...as I do many other economic ideas.
Cheers Roelof
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